Customer Value, Satisfaction and Loyalty

The New “Managerial Paradigm”

Amazon epitomizes the “Customer-Oriented” Model

So does Jones Soda…

So does Threadless…

• Value Benefits (actual or perceived) – – Come from features or product attributes May be economic, social or personal • Costs (actual or perceived) – Economic/Financial • • Money Time • Resources – Social/Personal • Aggravation, worry, feelings of uncertainty, distress • Social embarrassment, inferiority • The Value Equation: Value = Benefits - Costs

The Value Proposition The whole cluster of benefits the company promises to deliver less the associated total cost.

Loyalty A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite exposure to situational influences and marketing efforts that have the potential to cause switching behavior.

The Customer-Development Process Suspects Prospects First-time customers Disqualified Repeat customers Clients Members Partners Ex-customers

JetBlue has loyal customers

Question du Jour

Is it better to reward your most or least loyal customers?

Customer Satisfaction • Two components – Cognitive (thinking, reasoning, logic) – Affective (emotional) • Driven by Performance vs. Expectations Gap • Articulation Issues – Consumers can almost always articulate the reasons for their dissatisfaction – Sometimes harder for consumers to articulate why they are satisfied

Measuring Satisfaction Periodic Surveys Customer Loss Rate & Returns Mystery Shoppers Word of Mouth

Product and Service Quality Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Quality Conformance quality Performance quality

Customer Acquisition & Retention • • • • Acquisition of new customers is almost always far more expensive than retaining current customers.

Consumers aren’t as brand loyal as they used to be.

Small reductions in customer churn can have huge implications for profit gain.

Customer profitability tends to increase over the life of a retained customer.

Quality Exercise • How do consumers typically define QUALITY for the following products?

– Flights – Dinner Out – Cars – Computers – Medical Services – Artwork – Hotel Stays